The complexity about California foreclosure laws arises, due to the fact that there are two types of mortgage loans namely - recourse loan and non-recourse loan.
The explanation for these types of loans under the California law can go into volumes.
So the simple meaning is - under a recourse loan, a borrower may have personal liability after the foreclosure sale; and a borrower will not normally have any personal liability, following a judicial foreclosure Sheriff Sale on a non-recourse loan.
California State foreclosure laws permit both judicial foreclosures and non-judicial foreclosures.
This is not the case in many other States, where either of the one is permitted.
For example in Florida only judicial foreclosure is permitted.
What is the difference between the two? Let us see: A judicial foreclosure is one, where the mortgage lender has to file a law suit in the County Court.
Documentary proofs of default have to be filed before the Court to take up the case for preliminary acceptance of a trial.
A notice called Lis Pendens - in simple language - notification of a pending law suit - is sent to the mortgagee borrower.
The Court decides and passes an order for the foreclosure sale of the property through public auction.
A Sheriff Sale is conducted at the Court steps and the property is assigned to the highest bidder.
The typical time of a judicial foreclosure lasts about 120 days.
The borrower will have a maximum of one year, under certain circumstances, to redeem the property.
So far so good.
In the non-judicial foreclosure process, it is initiated out of Court.
In the mortgage agreement a "Power of Sale" clause is inserted - empowering the lender to sell the property, in case of default in repayment through a "Trustee Sale" foreclosure.
Precisely the difference is the lender needs no Court order to sell the property.
A notice of sale through public auction by a third party Trustee, generally the representative of the lender, who is authorised to execute the "Power of Sale", is sent 20 days prior to the sale and the borrower is given just 5 days' time to settle the default and stop the foreclosure.
Importantly, lenders cannot petition for a deficiency judgement and the borrower has no right of redemption here.
For example in the 9-county San Francisco Bay Area, both these foreclosure processes are applicable, as it is inside California State.
In practice, lenders take advantage of the speed and easiness of non-judicial foreclosure process here mostly.
The most disadvantageous position comes in the form of "deficiency judgement" where the lender is permitted by the Court to pursue the borrower, even after a foreclosure sale, for the balance outstanding - that is the difference between the sale proceeds realized by a foreclosure sale and the actual mortgage balance.
The persuasion for the balance can take place, only with a Court Order and yet some lenders use this section as leverage, when borrowers-home owners approach the lenders with a Short Sale request.
Actually, according to the provisions of Home Affordable Foreclosures Alternative Program introduced by the federal government, the borrower is freed completely from the mortgage debt and there cannot be any persuasion after a Short Sale.
So what is the best advice for troubled home owners in California, particularly in SF Bay Area? They can leave the legal aspects of a foreclosure or short sale in the hands of a trusted Realtor in the area, which will save them from all these confusions and apprehensions regarding their mortgage loan - recourse or without recourse - and protect their interests completely.
The explanation for these types of loans under the California law can go into volumes.
So the simple meaning is - under a recourse loan, a borrower may have personal liability after the foreclosure sale; and a borrower will not normally have any personal liability, following a judicial foreclosure Sheriff Sale on a non-recourse loan.
California State foreclosure laws permit both judicial foreclosures and non-judicial foreclosures.
This is not the case in many other States, where either of the one is permitted.
For example in Florida only judicial foreclosure is permitted.
What is the difference between the two? Let us see: A judicial foreclosure is one, where the mortgage lender has to file a law suit in the County Court.
Documentary proofs of default have to be filed before the Court to take up the case for preliminary acceptance of a trial.
A notice called Lis Pendens - in simple language - notification of a pending law suit - is sent to the mortgagee borrower.
The Court decides and passes an order for the foreclosure sale of the property through public auction.
A Sheriff Sale is conducted at the Court steps and the property is assigned to the highest bidder.
The typical time of a judicial foreclosure lasts about 120 days.
The borrower will have a maximum of one year, under certain circumstances, to redeem the property.
So far so good.
In the non-judicial foreclosure process, it is initiated out of Court.
In the mortgage agreement a "Power of Sale" clause is inserted - empowering the lender to sell the property, in case of default in repayment through a "Trustee Sale" foreclosure.
Precisely the difference is the lender needs no Court order to sell the property.
A notice of sale through public auction by a third party Trustee, generally the representative of the lender, who is authorised to execute the "Power of Sale", is sent 20 days prior to the sale and the borrower is given just 5 days' time to settle the default and stop the foreclosure.
Importantly, lenders cannot petition for a deficiency judgement and the borrower has no right of redemption here.
For example in the 9-county San Francisco Bay Area, both these foreclosure processes are applicable, as it is inside California State.
In practice, lenders take advantage of the speed and easiness of non-judicial foreclosure process here mostly.
The most disadvantageous position comes in the form of "deficiency judgement" where the lender is permitted by the Court to pursue the borrower, even after a foreclosure sale, for the balance outstanding - that is the difference between the sale proceeds realized by a foreclosure sale and the actual mortgage balance.
The persuasion for the balance can take place, only with a Court Order and yet some lenders use this section as leverage, when borrowers-home owners approach the lenders with a Short Sale request.
Actually, according to the provisions of Home Affordable Foreclosures Alternative Program introduced by the federal government, the borrower is freed completely from the mortgage debt and there cannot be any persuasion after a Short Sale.
So what is the best advice for troubled home owners in California, particularly in SF Bay Area? They can leave the legal aspects of a foreclosure or short sale in the hands of a trusted Realtor in the area, which will save them from all these confusions and apprehensions regarding their mortgage loan - recourse or without recourse - and protect their interests completely.
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